Inflation Resource Center
In today's market environment, many investors are focused on the potential investment implications of rising inflation. This Resource Center provides thoughtful insights and potential solutions for a number of situation-based outcomes.
Featured Funds
I-Share: LIFIX
Inflation Focused Fund
The Fund seeks to deliver total returns that exceed the rate of inflation in the U.S. over a full inflation cycle and current income by combining investments in inflation-linked derivatives with a portfolio of fixed income securities.
I-Share: LBNYX
Bond Debenture Fund
The Fund seeks to deliver high current income and long-term growth of capital by investing primarily in a variety of fixed income securities and select equity-related securities.
I-Share: LLDYX
Short Duration Income Fund
The Fund seeks to deliver a high level of current income consistent with the preservation of capital by investing in a variety of short maturity debt securities including, corporate bonds, U.S. government securities, and mortgage- and other asset-backed debt securities.
I-Share: LFRIX
Floating Rate Fund
The Fund seeks to deliver a high level of current income by investing primarily in a variety of below investment grade loans.
Current 5-Year Forward Inflation Rate*
2.29%
Current 10 Year Treasury Rate*
3.57%
*Source: FRED. Data as of 09/21/2022.
Real Rate of Return
0.34%
Target Fed Funds Rate
3.00-3.25%
What We Know: Headline Inflation Measures Have Surprised
Headline inflation has continued to surprise to the upside coming in above expectations
Source: Bloomberg and Lord Abbett. Data as of 06/30/2022. For illustrative purposes only.
Traditional Investment Vehicles Show Real Rates of Return Being Negative
Year |
6-month CD1 |
Federal Tax Rate2 |
After-tax Return3 |
Inflation4 |
Real Rate of Return5 |
Value of $1,0006 |
|---|---|---|---|---|---|---|
2012 |
0.39% |
22% |
0.30% |
1.70% |
-1.40% |
$986 |
2013 |
0.27% |
22% |
0.21% |
1.50% |
-1.29% |
$973 |
2014 |
0.43% |
22% |
0.34% |
0.80% |
-0.46% |
$969 |
2015 |
0.89% |
22% |
0.69% |
0.70% |
-0.01% |
$969 |
2016 |
1.27% |
22% |
0.99% |
2.10% |
-1.11% |
$958 |
2017 |
1.82% |
22% |
1.42% |
2.10% |
-0.68% |
$951 |
2018 |
2.82% |
22% |
2.20% |
1.90% |
0.30% |
$954 |
2019 |
1.79% |
22% |
1.40% |
2.30% |
-0.90% |
$946 |
2020 |
0.22% |
22% |
0.17% |
1.40% |
-1.23% |
$934 |
2021 |
0.25% |
22% |
0.20% |
7.00% |
-6.81% |
$870 |
Average |
1.01% |
22% |
0.79% |
2.20% |
-1.38% |
N/A |
Source: Bloomberg. Data as of 12/31/2021. 6-month CD Rate represented by Bloomberg CD 6-month Index. Past performance is no guarantee of future results. "CD" refers to Certificate of Deposit, which is an investment vehicle typically offered by banks and credit unions that provides an interest rate premium in exchange for investing for a pre-determined period of time. The table above assumes a 22% Federal Tax Rate. The information provided would be different for individuals in different tax brackets. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
Performance During Periods of Rising Inflation Expectations
Time Period |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
7 |
|---|---|---|---|---|---|---|---|---|
9/23/2011 - 3/14/2012 |
6/28/2012 - 9/14/2012 |
1/13/2015 - 7/3/2015 |
2/11/2016 - 4/28/2016 |
8/2/2016 - 1/31/2017 |
6/20/2017 - 7/10/2018 |
3/18/2020 - 11/16/2021 |
1/21/2022 - 4/22/2022 |
|
Lord Abbett Inflation Focused Fund I |
7.43% |
5.83% |
3.10% |
5.36% |
7.14% |
4.66% |
21.25% |
1.35% |
Barclays US TIPS Index |
1.85% |
2.46% |
(0.83%) |
2.89% |
(0.90%) |
2.04% |
7.86% |
(1.93%) |
Barclays US Aggregate Index |
0.09% |
0.68% |
(1.41%) |
1.15% |
(2.75%) |
(0.54%) |
2.06% |
(7.57%) |
Source: Bloomberg, Morningstar Direct. Data as of 06/30/2022.
The performance data quoted reflect past performance and are no guarantee of future results. Fund performance is based on total return of Class I Shares at net asset value, including the reinvestment of all distributions, if any, but excludes the deduction of sales charges which are not applicable to Class I Shares. Returns for periods of less than one year are not annualized, but returns for periods greater than one year are annualized. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment. Instances of high double-digit returns were achieved primarily during favorable market conditions and may not be sustainable over time. Inflation Expectations are based on the 5 yr CPI Swap Rate. "CPI" refers to the Consumer Price Index, which is used to measure inflation based on the price of goods and services, and in this case is used as the reference index for inflation swap transactions.
Potential Solutions to Consider
Whether preparing for an inflationary environment, or seeking a flexible fixed-income solution for a number of market outcomes, Lord Abbett offers several funds.
|
Dividend Yield |
30 day Standardized Yield |
Effective Duration |
|---|---|---|---|
3.56% |
3.85% |
2.71 years |
|
5.40% |
5.82% |
3.75 years |
|
3.71% |
3.70% |
2.16 years |
|
5.53% |
5.57% |
0.45 years |
Fund Total Return Performance
|
1 Year |
3 Year |
5 Year |
10 Year |
|---|---|---|---|---|
0.36% |
5.68% |
3.94% |
1.89% |
|
-11.93% |
0.06% |
2.09% |
4.44% |
|
-4.05% |
0.39% |
1.50% |
2.02% |
|
-0.72% |
1.23% |
2.18% |
3.38% |
Data as of 08/31/2022. Performance data quoted reflect past performance and are no guarantee of future results. Current performance may be higher or lower than the performance quoted. The investment return and principal value of an investment in the Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end by calling Lord Abbett at 888-522-2388 or referring to lordabbett.com. Fund performance is based on total return of Class I Shares at net asset value, including the reinvestment of all distributions, if any, but excludes the deduction of sales charges which are not applicable to Class I Shares. Returns for periods greater than one year are annualized. Instances of high double-digit returns were achieved primarily during favorable market conditions and may not be sustainable over time. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.
Fund Expense Ratio Detail: Reflects expenses for the Fund's fiscal year-end and is subject to change. Fund expenses may fluctuate with market volatility. A substantial reduction in Fund assets (since its most recently completed fiscal year), whether caused by market conditions or significant redemptions or both, will likely cause total operating expenses (as a percentage of Fund assets) to become higher than those shown. Short Duration Income Fund I Share Fund Expense Ratio: 0.38%. Inflation Focused Fund I Share Fund Expense Ratio: 0.44%. Floating Rate Fund I Share Fund Expense Ratio: 0.59%. Bond Debenture Fund I Share Fund Expense Ratio: 0.56%.
Insights on Inflation
Insight
U.S. Inflation: Service Sector Pressure Keeps Fed on Tightening Track
Worse-than-expected readings in the U.S. consumer price index for September were paced by stubborn strength in service-sector prices
Insight
The Rate Hikes Will Continue Until Inflation Improves
The U.S. Federal Reserve hiked rates by 75 basis point for the third straight meeting, with another such move all but certain for November.
